Penned by – Harshit Agrawal
Last month two events from the Indian music industry created a buzz on the social media.
First was the removal of the song ‘Varaha Roopam’ from the climax of Kannada film
Kantara in its OTT debut. The disappointed fans expressed their anguish arguing that the
alternate ending does not create the same impact. Second was the yearly ‘Wrap’ released by
the music streaming platform, Spotify. People actively shared and discussed about the songs,
artists and genres that were part of their life in 2022.
Both of these events suggest the love of Indian audience for music. The liking for music does
not automatically convert into direct revenues for the industry. The article discusses about
piracy and lack of compliance of public performance rights in this context.
India is the 17th largest music market in the world. The recorded music industry, in 2021,
grew by 20.3% to reach USD 219 million. Of this amount, 86.9% came from streaming, 5.3%
from synchronisation, 3.8% from performance rights and 1.4% from physical products. As
per an estimate, the live music industry attracted revenues of USD 280 million. The revenues
from tickets constitute 30% of the total.
Piracy in the Music Industry
Music piracy is a practice of providing access to the recordings of the music without the
consent of the owners. High internet penetration along with affordable data have made piracy
rampant in the country. Increased use of short form video apps apart from other illegal P2P
streaming services have further contributed to the same. The user penetration for legal music
streaming services like Spotify & YouTube is only 6.4%. In comparison to the countries like
United States (47.3%), the penetration is very low. This is when an average Indian consumer
spends 21.5 hours per week listening to music, approximately 4 more hours than the global
average. As per the report by Indian Music Industry (IMI), the rate of music piracy in India at
68% is much higher than the global average of 30%. IMI estimated a loss of USD 250 million
annually to the recorded music industry because of piracy.
The issue of piracy in music industry first came to spotlight around 20 years ago because of
websites like Napster. These websites allowed consumers to freely download music without
the required permissions. The industry has since then been arguing that such practices create
a habit of consuming music for free amongst the users. In a recent survey, IMI found that
almost half of the candidates belonging to the age group of 16-24 years are not likely to pay
for music. This age group is particularly important for the industry as it represents the major
user base (97%) for the music streaming services. The industry, therefore, argues that if the
trend of this piracy continues, no one will have the incentive to produce music.
Looking at the trend from last 20 years, the argument does not seem to be very convincing.
Despite piracy increasing over the years, the industry has only flourished. Not only superstar
musicians sold millions of copies but there are much more people in industry now.
Another facet of music piracy is the popularity that it brings along with it. This is something
which particularly impacts the upcoming individuals in the industry. Unlike established
artists, emerging ones do not earn much from recording contracts. Most revenues from such
recordings flow to the big studios. But the popularity that these artists get help in getting
more gigs and attracting audience to their live shows. Internet and piracy, today, are helping a
lot of these emerging stars go viral.
Public Performance Rights & Compliance
The owners of the music have the right to receive royalties from business establishments for
playing their music publicly. The rule applies equally to restaurants, pubs, clubs, shopping
malls etc. But because of easy availability of pirated content as well as music streaming
services, very few establishments actually obtain license to play music publicly. As per an
estimate, less than 5% of such businesses pay any fees.
Indian Singers’ Rights Association (ISRA) is one such organization which is fighting
particularly for the rights of singers to receive royalties from business establishments. ISRA,
with notable singers like Asha Bhosle, Sonu Nigam, Pankaj Udhas and Kailash Kher as its
members, was incorporated to seek the economic benefits of royalties in parallel to the
producers/composers of music. Interestingly, ISRA provides multiple tariff schemes designed
for variety of commercial usage including motor vehicles (like auto rickshaws, buses),
school/college premises, night clubs and bars. The licensing fee in most cases is nominal. In
the financial year ending March 2022, the association received revenues of around Rs 2 crore
from its operations.
The Indian Performing Right Society Limited (IPRS) is another such company which is
engaged in the business of collecting royalties on behalf of music directors, lyricists, and
music companies. Like ISRA, IPRS also works on a licensing model to collect royalties from
the entities who use music from for public purpose. The society was in news during covid
when it asked to pay high tariff for online live performances by musicians.
The arguments against the music industry for stringent enforcement of such royalties also
revolve around how these businesses help the music to achieve popularity amongst the
masses. The returns that the industry receive through concerts, shows and other live
performances are much higher than the royalties could achieve. Further, lack of transparency
and clarity to get these licenses act as a hurdle for business to pay the owners of the music.
The companies mentioned above are only responsible for issuing licenses for the music of
their registered members. Also, there have been allegations on the industry of using coercive
methods to obtain such royalties. Introduction of separate streaming service for business
could be a possible solution.
The conditions in the Indian music market are very different from the rest. It will be very
difficult for the industry to navigate its way through complex rules. But the industry can
always strategically leverage the conditions in its favor to extract the rightful value of its
The Economics and International Business Club of IIM Indore
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